On February 4, the Fifth Circuit Court overturned a September 2023 order from a Texas trial court finding President Biden lacked the authority under the Federal Property and Administrative Services Act (FPASA or Act) to increase the minimum wage for federal contractors to $15 per hour. A three-judge panel found the president was within his authority under FPASA to hike the minimum wage because the president subjectively determined the hike would benefit government contracting and the order was objectively compatible with the language of the statute. The breadth of presidential authority under FPASA has recently become a hotly contested legal issue. The Fifth Circuit decision adds another circuit court weighing in on an issue that has already split the Ninth and Tenth circuits, increasing the likelihood that the Supreme Court weighs in.
The Federal Property and Administrative Services Act
Enacted in 1949, FPASA was intended to “provide the Federal Government with an economical and efficient system for . . . [p]rocuring and supplying property and nonpersonal services.” 40 U.S.C. § 101(1). The Act authorizes the president to “prescribe policies and directives that the President considers necessary to carry out” FPASA and that are “consistent with” the Act. Id. § 121(a).
FPASA is frequently cited by presidents as support for the imposition of social policy requirements on government contractors, leveraging the authority under FPASA whenever a policy is generally related to government contracting, and reading expansively the limitation of the authority to provide an “economical and efficient system” of procurement. For example, President Obama used FPASA to initially implement a separate minimum wage for federal contractors. More recently, President Biden relied on FPASA to enact COVID-19 vaccine mandates, greenhouse gas emissions reporting, and gender equity rules.
5th Circuit Decision
The Fifth Circuit upheld the Biden administration’s minimum wage increase executive order finding it met two requirements: “(1) the President must subjectively determine that the policy or directive prescribed is (a) indefensible, vital, essential, or requisite (b) to cause at least one provision listed in 40 U.S.C. § 111 to be implemented; and (2) the policy or directive the President prescribes must be objectively harmonious, compatible, or otherwise not inconsistent with the provisions listed in 40 U.S.C. § 111.”
First, the court found that President Biden subjectively determined the executive order (EO) was necessary to promote economy and efficiency in procurement. The court stated, “[t]he EO states its purpose is ‘to promote economy and efficiency in procurement by contracting with sources that adequately compensate their workers.’” Further, the president “determined that ‘contracting with sources that adequately compensate workers’ is vital or essential to carrying out § 101” of the law. Therefore, the first prong of the test—the subjectivity prong—was met.
Second, the court found that objectively, the EO is consistent with promoting “economy and efficiency” in federal procurement. The court noted that while several circuits have developed tests to test the relationship between EOs and § 101 criteria including a “sufficiently close nexus” test and “reasonably related” test, it was a matter of first impression for the Fifth Circuit. Therefore, the court looked to the ordinary meaning of “economy,” understanding the term to mean “[t]he management or administration of the material resources of a community, discipline, or other organized body; the art or science of managing such resources.” Similarly, the court found the ordinary meaning of “efficiency” to be “[f]itness or power to accomplish, or success in accomplishing, the purpose intended; adequate power, effectiveness, efficacy.” The court found these terms not to be narrow, but to broadly include “factors like price, quality, suitability, and available of goods or services that are involved in all acquisition decisions.” The court argues “[t]he EO speaks directly to these factors, including price of services, quality of goods and services, and availability of services.”
Going Forward
The Fifth Circuit decision joins the Tenth Circuit in finding the FPASA authorizes the president to adjust the minimum wage applicable to government contractors; however, as we wrote in a blog post last December, the Ninth Circuit disagrees, finding that, absent an operative language, the FPASA does not authorize such actions. Presidents have long used FPASA to impose social policies on the government contracting community where there is insufficient support to implement the policy more broadly through congressional action. Given the circuit split, it is becoming increasingly likely that the Supreme Court will weigh in.
